BlackRock to Lower ETF Prices

By Ian Salisbury

BlackRock’s chief executive, Laurence Fink, may be ready to cry uncle. The company’s iShares unit plans to cut prices on some offerings in its popular line of exchange-traded funds, Reuters reported Monday.

The move, which SmartMoney predicted in July, comes after years in which Vanguard Group’s relentless focus on low fees chipped away at iShares’ once seemingly insurmountable lead in the ETF business. iShares’ U.S. market share, which peaked at about 60% five years ago, has slipped to about 40% today.

Acquired by BlackRock for $15 billion in 2009, iShares will almost certainly try other tactics in its effort to re-create the old magic, such as tweaking ETF formulas to make investors consider differences other than just the price tag.

One recent such move: A new line of international ETFs that aim to capture a broader swath of the market than current funds, which often ignore hard-to-trade stocks.

Will investors bite? There is no way to tell, but one thing is clear: iShares would much rather innovate than cut prices, because innovation doesn’t come directly from its bottom line.

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